Tokyo – Q4/2023
MARKETINMINUTESOﬃce Leasing

Savills Research

Savills team
Please contact
us for further
information
JAPAN
Christian Mancini
CEO, Asia Paciﬁc(Ex Greater China)+81 3 4330 3611
cmancini@savills.co.jp

RESEARCH
Tetsuya Kaneko
Managing Director,
Head of Research &Consultancy, Japan+81 3 4330 3103
tkaneko@savills.co.jp
Bryan Kuek
Manager, Research &Consultancy, Japan+81 3 4330 3104
bkuek@savills.co.jp

Moderate recovery takes holdModerate recovery has taken hold in the Tokyo office market, and the limited
supply in 2024 should help to stabilise the situation further• Oﬃce markets enjoyed moderate rental growth in Q4/2023 andthe outlook continues to improve. Vacancy rates are approaching
pre-pandemic levels, but the widespread proliferation of hybrid
work arrangements may delay further progress.
• Average Grade A oﬃce1 rents in the C5W increased by 0.5%
quarter-on-quarter (QoQ) to JPY32,579 per tsubo2 per month,amounting to a decline of 0.6% on a year-on-year (YoY) basis.
• The average Grade A oﬃce vacancy rate in the C5W tightenedby 0.2 percentage points (ppts) QoQ, and tightened by 0.7
ppts YoY to 3.2%.
• Average large-scale Grade B oﬃce3 rents also increased by 0.5%
over the quarter to JPY24,553 per tsubo per month, amounting
to a yearly increment of 0.3%.
• Vacancy rates in the Grade B market tightened by 0.4ppts overthe quarter to 3.6%.
• New oﬃce supply in 2023 has been absorbed with limited issues,and the modest new supply in 2024 should provide breathing
room for further recovery. That said, bifurcation by location
and age persists as tenants reassess their oﬃce needs in the
post-pandemic era.
1 Grade A offi ces refer to buildings with a GFA of 9,000 tsubo (30,000 sq m) and abuilding age of less than 15 years. Some buildings that do not ﬁt this deﬁ nition are
included.
2 1 tsubo = 3.306 sq m or 35.583 sq ft.
3 Large-scale Grade B offi ces refer to buildings with a GFA of 4,500 tsubo (15,000sq m) and a building age of less than 25 years. Some buildings that do not ﬁt thisdeﬁ nition are included.

savills.co.jp/insight-and-opinion/“Moderate improvements
to rents and vacancy wereobserved over the quarter inboth Grade A and Grade B
office markets. There werelimited issues with absorbing
the large office supply in 2023,
and the modest incoming
supply in 2024 bodes well forthe additional stability of themarket. However, bifurcation
based on location and age
may deepen further.”
SAVILLS RESEARCH & CONSULTANCY

1

Simon Smith
Regional Head of
Research & Consultancy,
Asia Paciﬁc+852 2842 4573
ssmith@savills.asia
Savills plc
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Oﬃce Leasing

GRAPH 1: Office Rents and Vacancy in Tokyo’s C5W*,
2011 to Q4/2023
Average Grade B Vacancy
Average Grade B Rent (LHS)
16%
14%30,00012%

25,00010%

20,0008%

15,000

6%

10,000

4%

5,000

2%

0

0%
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q4

35,000VACANCY RATE

RENT (JPY / TSUBO / MONTH)

Average Grade A Vacancy
Average Grade A Rent (LHS)
40,000

11

12

13

14

15

16

17

18

19 20 21 22 23

Source Savills Research & Consultancy* Chiyoda, Chuo, Minato, Shibuya, and Shinjuku

GRAPH 2: Grade A Office Rental Index by Ward,2011 to Q4/2023
ChiyodaShinjuku

Chuo
ShibuyaMinatoAverage210

Q1/2012 = 100

190

170

150

130

110

Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q4

90

11

12

13

14

15

16

17

18

19

20

21

22

23

Source Savills Research & Consultancy

GRAPH 3: Grade A Office Vacancy by Ward,
Q2/2022 to Q4/2023
Q2/2022
Q2/2023

Q3/2022
Q3/2023

Q4/2022
Q4/2023

Q1/2023

11%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
ChiyodaChuo

MinatoShinjuku

Shibuya

Source Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

GRADE A OFFICEIn the Tokyo Grade A oﬃce market, rental
levels and vacancy have enjoyed modest
improvements over the latter part of 2023,
and sound domestic economic growth has
been a tailwind for the oﬃce sector. For thesecond quarter in a row, average rents inthe central ﬁve wards (C5W) experiencedquarterly growth in Q4/2023 at 0.5% toJPY32,579 per tsubo, while annual rental
changes amounted to a 0.6% decline, which
is more modest than in the previous quarter.
As such, the total rental contraction from thepeak levels of Q2/2020 decreased marginallyto around 13.9% for the Tokyo C5W Grade Aoﬃce market.
Quarterly rental changes were moderate
across the C5W over the past quarter,
although some ﬂuctuations were observed at
the constituent ward level. Shibuya recorded
the largest rental increment at 1.9% QoQ,
and average rents in Shinjuku increased by
0.9% QoQ. Elsewhere, Chiyoda and Minato
rents remained unchanged over the quarter,
while Chuo was the only ward to experience a
rental contraction at 0.2% QoQ.
On a similar note, the average vacancy
rate for Grade A oﬃces in the C5W tightenedmodestly by 0.2ppts QoQ to 3.2%, andvacancy performance looks to continue
to make gentle improvements, especiallygiven the limited incoming supply in 2024.
Chuo witnessed the largest quarterly
decrease in vacancy by 0.8ppts to 6.1%, due
to progress made across a handful of oﬃces
with moderate amounts of empty space inprevious quarters. Meanwhile, vacancy rates
fell in Shinjuku and Chiyoda by 0.3ppts QoQ
and 0.1ppts QoQ, respectively. There were
no changes over the quarter in Minato, while
average vacancy loosened slightly by 0.5ppts
QoQ in Shibuya, largely due to the additionof new oﬃces that still have some available
ﬂoors. However, the demand for new oﬃces
remains ﬁrm in Shibuya, and the submarket
should have few problems dealing withremaining vacancies moving forward.
2023 emerged as a favourable year for
tenants, marked by multiple large leases
ranging from 2,000 to 3,000 tsubo. The
leasing landscape remains favourable fortenants, with rental corrections and enticing
ﬁnancial incentives. In addition, the market
has slackened with greater rental ﬂoor
ﬂexibility, creating an ideal environment forprospective tenants. Hence, tenants havesecured advantageous leasing conditions andhave carried out overdue relocations in therecovering market, expanding or contracting
their oﬃce footprints based on their revisedneeds in the post-pandemic landscape. Overall,this trend has been particularly welcoming formodern oﬃces with strong ESG speciﬁcations,and located in areas with good access andamenities, which have garnered signiﬁcantly
heightened interest for relocations.

2

However, these pandemic-induced shifts
have culminated in a noticeably bifurcatedmarket. Hybrid work arrangements havepersisted as a corporate perk, especially asﬁrms navigate the severe worker deﬁcit inJapan. In response, companies have been
forced to reconsider the roles and functionsof their oﬃces. This often includes a focus on
high-quality and specialised environmentsthat support employee communication andwell-being. Several older oﬃces with poor
access are likely unable to provide the samepractical and psychological beneﬁts, and so
will be unable to compete, a situation thatwill be compounded by the large amountsof modern oﬃce space that arrived to themarket in 2023, as well as the impendinglarge supply expected in 2025. Overall, while
the Tokyo oﬃce market should continue toimprove, there will likely be winners andlosers in the post-pandemic market, andﬂuctuations may intensify going forward.
LARGE-SCALE GRADE B OFFICES
Recovery appears to have also taken holdin the large-scale Grade B market, withmoderate improvements observed in termsof rental level and vacancy over the quarter.
Average rents increased by 0.5% QoQ to
JPY24,553 per tsubo, which translates
to a slight increment on a yearly basis.
Quarterly changes were moderate, with mostsubmarkets experiencing some encouraging
rental growth. The largest quarterly
increments were experienced in Shibuya
and Shinjuku at 0.9% and 0.8%, respectively,
while more gentle growth was seen in othersubmarkets over the quarter. Indeed, somelandlords appear to have had the conﬁdence
to raise rents in the current recovering
market, given the strong appetite for oﬃce
space and relocations among tenants, on topof the lack of new Grade B oﬃce supply inmost constituent submarkets in the C5W.
Meanwhile, average Grade B oﬃce vacancy
tightened by 0.4ppts QoQ in Q4/2023 to
3.6%. Notably, a handful of oﬃce properties
with moderate amounts of unoccupied spacein Shibuya were completely ﬁ lled over thequarter, and the ward consequently saw thelargest decrease in vacancy at 1.4ppts QoQ
to 1.1%, which is the lowest level among theconstituent wards of the C5W. Elsewhere,vacancy rates fell in Chiyoda, Minato, andShinjuku, all by 0.4ppts QoQ. On the other
hand, vacancy loosened by 0.5ppts QoQ in
Chuo to 5.4%, which can be attributed to ahandful of underperforming assets that areeither located in peripheral areas or have
above-market rents.
There have been relatively few changes
in the Grade B oﬃce market over the pastquarter, and the current trajectory appears to
be stable and positive. Overall, the demandfor oﬃce space has been improving among
tenants throughout the year, due to strong

Oﬃce Leasing

corporate performance and greater rates of oﬃce
attendance in 2023. Indeed, according to Mitsubishi
Real Estate Services, instances of oﬃce relocations
involving either expanding or maintaining
current oﬃce footprint sizes increased notably
between Q2/2022 and Q2/2023, from 53% and 9%,
respectively, to 59% and 22%. In particular, manyoﬃce expansions have taken place over recent
quarters, with many ﬁrms proactively increasing
their staﬀ headcounts due to improved economic
sentiment in Japan, even despite hybrid work
arrangements appearing to remain in place.
However, bifurcation by location and age isa persistent issue, and a handful of large-scale
Grade B oﬃces located in peripheral areas, suchas Harumi in Chuo and Daiba in Minato, continue
to experience hurdles in ﬁlling vacant space.
Struggling properties will be increasingly forced torevise rents and oﬀer other incentives such as longer
free rent periods in order to manage this situation.
Nevertheless, encouraging prospects for futurenominal growth in Japan, as well as further gradualincrements in oﬃce attendance, should continue
to support recovery in the market, which raises thepossibility of further rental growth moving forward.
GRADE A RENTS AND VACANCY RATESBY WARD
ChiyodaChiyoda’s rents remained ﬂat over the quarterat JPY38,718 per tsubo, while average vacancy
tightened by 0.1ppt QoQ to 1.4%. There are few
concerns about the situation in Chiyoda, which
retains the highest rents and some of the lowest
vacancy rates among the constituent wards of
the C5W. Indeed, changes were marginal over thequarter, and Chiyoda’s enduring reputation as
Japan’s premier business hub should bode well for
leasing demand moving into 2024.
Oﬃce movement activity has been relatively
slow in Chiyoda over the quarter. The largest
relocation will be by PHC holdings, which willreportedly take a 500 tsubo lease in Dai-ichi Life
Hibiya First in April 2024, consolidating scatteredoﬃces into a single ﬂoor to boost communicationand productivity. Cliﬁ x Certiﬁed Public Tax
Accountant’s Corporation will relocate its
headquarters to Otemachi First Square East
Tower around March 2024, reportedly leasing 300
tsubo in the East Tower section. Meanwhile, anaﬃ liate of Nagoya-based Paloma will lease around180 tsubo in Marunouchi Trust Tower Main.
Chuo
Average rents in Chuo decreased marginally by
0.2% QoQ to JPY31,485 per tsubo in Q4/2023,
while vacancy tightened by 0.8ppts QoQ to 6.1%,
following the moderate loosening in the previous
quarter. The strong leasing performance of many
modern properties in the Nihonbashi and Yaesu
submarket is an indication of the encouraging
economic situation and sound sentiment in theoﬃce sector in the post-pandemic era. That said,
Chuo ward is large and diverse, containing bothprime business areas next to Tokyo station, as well
as more peripheral districts in the Tokyo Bay area,
where a handful of buildings struggle with large
amounts of vacant space. Rents and vacancy diﬀer
considerably between these areas, and bifurcation in
the performance of individual properties will likely
continue depending on accessibility and age.
Leasing activity appears to have accelerated

in Chuo in Q4/2023. Marubeni will relocate its
headquarters to Tokyo Midtown Yaesu in May
2025, reportedly leasing an estimated 2,660
tsubo, which was the largest announcement in
the ward over the quarter. Elsewhere, there were anumber of moderately sized relocations announced,
including Dolbix Consulting taking a 350 tsubo leasein the Muromachi Furukawa Mitsui Building in July
2024, as well as Sunny Health’s 350 tsubo lease in the
Toda Building in early 2025, relocating away from thestruggling Harumi area in the process.
MinatoThe situation appears to remain steady in
Minato over the past quarter, with average rents
unchanged QoQ at JPY30,200 per tsubo, whichtranslates to an annual decline of 1.0%. Similarly,
vacancy was unchanged QoQ at 6.1%. The spotlighthas been on the Toranomon area in 2023 with anumber of large additions arriving to the market
in the latter part of 2023, including Azabudai Hills
Mori JP Tower and Toranomon Station Tower,
which should transform the area.
Toranomon Station Tower has been performing
well in particular, having received ﬁ rm interest
from prospective tenants over the quarter, andappears to be aiming for eﬀectively full occupancy
by the end of the year. Indeed, Goldman Sachs
and IBM Japan took out relatively large leases of
6,000 tsubo and 1,500 tsubo, respectively in thebuilding, with the prior reportedly occupying
six ﬂoors and becoming the main tenant of theproperty. Meanwhile, Azabudai Hills Mori JP
Tower has made some decent progress with ﬁ llingup space since its completion in the latter half of2023. Philips Japan, GO, and Kakao Piccoma will

MAP 1: Average Rents Per Tsubo in Selected Submarkets, Q4/2023

¥30.2

¥27.9
¥31.6

¥43.2
¥35.5

¥22.0

¥33.5
¥30.8
¥26.9

¥37.8

Source Savills Research & Consultancy
Grade A Offi ce, average passing rent + CAM per tsubo per month in thousand JPY. Coloured areas for illustrative purposes only.

savills.co.jp/insight-and-opinion/3

Oﬃce Leasing

TABLE 1: Tenant Relocations, Q4/2023

ORIGIN
ChiyodaChuo

MinatoShibuya

Shinjuku

Other

3

11

19

6

1

18

DESTINATION

2

1
7

1

4

1
15
1

3
1

2

2

2

5

Chiyoda

1

9

Chuo

1

21

Minato1

5

Shibuya

1

2

Shinjuku

12

16

Other

Source Nikkei RE, Savills Research & Consultancy

TABLE 2: Notable Office Leasing Transactions, Q4/2023

COMPANY

BUSINESSSECTOR

TYPE

Goldman Sachs
Japan

Financial
Services

OfficeRelocation

Marubeni-Itochu
Steel

TradingCompany

HQ Relocation

Nihon Chouzai

Pharmaceuticals

Undisclosed

Edwards
Lifesciences

MedicalTechnology

HQ Relocation

Marubeni I-Digio
Holdings

Information
Technology

HQ Relocation

APPROXIMATE SPACEFORMER/CURRENTLOCATION

NEW LOCATION

Roppongi Hills
Mori Tower

Toranomon Hills Station Tower

MinatoMinatoNihombashi 1-Chome
Mitsui Building

Yaesu Central Tower
in Tokyo Midtown Yaesu

Chuo

Chuo

GranTokyo North Tower

Tamachi Tower

ChiyodaMinatoNittochi Nishi-Shinjuku Building

Shinjuku Front Tower

Shinjuku

Shinjuku

Various

Sumitomo Fudosan Iidabashi First Tower

Various

Bunkyo

TSUBO

SQ M

6,000

19,800

2,660

8,790

1,580

5,220

1,500

4,960

1,500

4,960

Source Nikkei RE, Savills Research & Consultancy

lease nearly 1,100 tsubo, 600 tsubo, and 500 tsubo,
respectively in the building, and the property is
expected to push to reach 90% occupancy by early2024. That said, in the meantime, there are still
fairly large amounts of vacant space in the building,and competition from other new developments inthe area may hamper this progress somewhat.
Elsewhere, Nippon Kinzoku will reportedly sell
its current headquarters in Minato and relocate
to G-Base Tamachi, leasing approximately 680
tsubo of oﬃce space. The company plans to
reduce the number of leased ﬂoors through the
move, streamline operations, and create an oﬃce
suitable for a range of working styles. Overall,more companies moved to Minato than exited theward, and the situation in the submarket appears
to gradually improve looking ahead.
ShibuyaShibuya appears to be a standout performer
amongst the C5W in 2023. Rents increased by
1.9% QoQ at JPY35,659 per tsubo. Althoughsavills.co.jp/insight-and-opinion/vacancy loosened slightly by 0.5ppts QoQ, thesituation in Shibuya remains tight, with averagevacancy at 1.6% in Q4/2023, which is among thelowest in the C5W. Shibuya is a popular oﬃce
location, due to its convenient location and rangeof amenities nearby, and is a particularly populararea among IT ﬁrms, as well as foreign companies.
Modern oﬃces have enjoyed strong interest among
tenants in 2023, demonstrated by ﬁrm pre-leasing
activity and low levels of vacancy among suchdevelopments, particularly Shibuya Sakura Stage,
and availabilities are currently scarce overall in themarket. As such, landlords are in a strong position
and future rental increments are possible.
Given the tight conditions in the Shibuya
market, tenant relocation activity has been
relatively limited over the quarter. Broad-minded
will relocate its headquarters to Shibuya Sakura
Stage in October 2024, reportedly leasing 500
tsubo in the building, which will be the largest
move in Shibuya announced in Q4/2023. The
company plans to expand its staﬀ headcount,4

and aims to provide a comfortable working
environment that enables communication and has
close proximity to Shibuya station.
Meanwhile, Ject One will relocate its
headquarters to SHIBUYA AXSH in December
2024, which is currently under construction near
Shibuya station. The company plans to expand on
its current oﬃce space, leasing around 400 tsubo,
in anticipation for accelerating hiring activity, but
appears to maintain hybrid work arrangements forthe time being.
Shinjuku
Shinjuku’s oﬃce market has displayed further
improvements over the quarter. Quarterly rental
growth was strong at 0.9%, reaching JPY26,833 pertsubo, while vacancy fell by 0.3ppts to 1.0%. The
Shinjuku oﬃce market is also in a positive situation- occupancy levels are high, and availabilities are
scarce. As such, there were only a few notable oﬃce
relocations over the quarter, and the Shinjuku market
appears to be stable going into 2024.

Oﬃce Leasing

GRAPH 4: Office Supply (GFA) Estimates* for the
C5W and the 18W, 2023 to 2026F
C5W

18W

500
450

GFA (THOUSAND TSUBO)

400
350
300
250
200
150
100
50
0
2023

2024F

2025F

2026F

Source Savills Research & Consultancy*Adjusted GFA ﬁgures based on estimated offi ce ﬂ oor space

Edwards Lifesciences will relocate their headquarters to
Shinjuku Front Tower, taking out a lease of 1,500 tsubo, whichis the largest oﬃce movement in Shinjuku over the quarter.
Meanwhile, Movensys reportedly also leased approximately
150 tsubo in Shinjuku Front Tower in October 2023. Similar toother tenants in 2023, Movensys aimed to expand its ﬂoor spacewith a view to increase its employee headcount, and considers
the convenience of Shinjuku as a major factor in its recruitment
eﬀorts. There will reportedly be no new oﬃce supply in the
Shinjuku market until the completion of the Meiji Yasuda Seimei
Shinjuku Building, slated to open in early 2026. As such, thecurrent tight situation is likely to continue into the near future.
2024 OFFICE SUPPLY
2023 was a signiﬁcant year for new oﬃce supply, with a
total GFA of nearly 450,000 tsubo completed over the year.
With the Tokyo oﬃce market still in a recovery phase, manyobservers were initially concerned about a potential uptick
in vacancies and general instability, especially because
many new developments have high target rents. However,Japan’s economic performance has been strong in 2023, anda number of companies have expanded their headcounts. At
the same time, average vacancy has still been relatively loose
in 2023, and some landlords have continued to oﬀer generous
incentives in order to quickly secure tenants. As such, many
companies have seized opportunities to carry out overdue
oﬃce relocations and consolidations throughout the year
while premium space is available, which has eased many
concerns among observers.
This encouraging momentum bodes well for the market,
and the limited supply forecast in 2024 should help to further
stabilise the situation going forward. The pipeline of newoﬃce supply in 2024 comprises a total GFA of roughly 150,000
tsubo (Graph 4), which is around one third of the 2023
level, and pre-leasing activity has been encouraging so far
at over 30% overall. New oﬃces with good access remain
highly sought after. In particular, the Shin-Tora Yasuda
Building, scheduled for completion in February 2024, isreportedly fully pre-leased. Similarly, SHIBUYA AXSH,
to be completed in May 2024, is reportedly nearly fully
pre-leased, beneﬁtting from the extremely tight market
conditions in Shibuya, while over half of the TODA Building,
to be completed in September 2024, appears to be ﬁ lled. Not

savills.co.jp/insight-and-opinion/

all new supply has been that fortunate, but
the current pre-leasing trend hints towards
overall stability and sound demand for oﬃces
with good access and ESG features.
Sentiment among market players appears
to be relatively positive with respect to thesituation in 2024. According to a recent
survey regarding Grade A oﬃces in Tokyo
by Nikkei Real Estate Market Report, overhalf of respondents predicted moderate
improvements in vacancy in both 1H/2024
and 2H/2024. With regards to asking rents
in 1H/2024, half of respondents predicted nochanges, and nearly a ﬁfth saw some rental
growth potential, while for 2H/2024, the same
proportion predicted no changes, and the
proportion predicting rental growth increased
moderately. Vacancy rates currently hoveraround the 1% level in Shibuya, Shinjuku, andChiyoda, and the limited incoming supply in
2024 should not disrupt the situation. Thisappears to be a sign of overall market stability,
and rental growth should be a distinct
possibility in 2024.
That said, a large expansion in oﬃce supply
in 2025 may present further issues for theoﬃce market. Although leasing demandhas been sound enough in 2023 to absorb
incoming large supply with limited issues,
which is another positive sign for 2024, thesame is not guaranteed to occur in 2025. Like
2023, over 400,000 tsubo of oﬃce supply(GRA) is slated for completion in 2025, witha considerable amount contributed by theenormous Takanawa Gateway City complex
in Minato ward. While the project has
already generated some interest, with KDDI
reportedly taking a large lease of almost
30,000 tsubo in the building, it remains tobe seen how the remaining new supply isreceived, and the absorption of new properties
may generate large amounts of secondary
vacancies. In addition, global, and subsequentJapanese macro-economic instability in 2024
may threaten to dampen oﬃce leasing demand
moving forward. Also, expected delays tothe much awaited Chuo Linear Shinkansen
project have not boosted prospects.
The strength of leasing demand maychange, depending on macro-economic
conditions, although new oﬃce supply may
cause secondary vacancies elsewhere in theTokyo oﬃce market, exacerbating bifurcationand contributing to further instability. Thatsaid, the oﬃce market has responded well tothe uptick in new oﬃce completions in 2023,
and pre-leasing activity among upcoming
properties in 2024 has been sound. Indeed,
the limited amount of new supply arriving in
2024 should bode well for the stability of theTokyo market moving forward. New labourlaws in 2024 surrounding the constructionindustry might also delay projects, andresult in the staggering of supply. Overall,steady improvements in the oﬃce sector lookencouraging.

5

OUTLOOK
Recovery appears to be progressing steadilyin the Tokyo Grade A and large-scale Boﬃce market in Q4/2023, buoyed by strong
economic growth in 2023. Average rents
increased moderately in both Grade A and
Grade B markets, while vacancies tightened
for a consecutive quarter. Indeed, demand
among tenants for oﬃce relocations hasremained ﬁrm over the quarter, and a
growing number of tenants are actively
growing their staﬀ count and looking toincrease their oﬃce footprints. As such,vacancy rates are noticeably lower now thanduring the height of the pandemic, and mostsubmarkets are gradually approaching prepandemic levels.
The Tokyo oﬃce market responded wellto the large amount of new oﬃce supply
completed in 2023, which appears to have
had limited bearing on the stable recovery
seen over recent quarters. This may beserendipitous for the market looking ahead,
due to the limited amount of new supply
slated for completion in 2024, which should
create some breathing room for further
recovery and further stabilise the situation
overall. Pre-leasing activity for new oﬃces
in 2024 appears to be progressing, given
the strong appetite for modern oﬃces infavourable locations. As such, any notabledeviations from the current stable recovery
trend are unlikely for the time being, whilesome submarkets with tight levels of vacancy
may experience moderate rental growth overthe coming year.
Nevertheless, the oﬃce market still hassome way to go until full recovery, and there
are still many uncertainties that may delay
this progress. Hybrid work arrangements
appear to remain a common feature, especiallyamong large companies, as tenants adapt to the
newly established roles and functions of theiroﬃces in the post-pandemic environment.
This may result in some limitations regarding
future oﬃce leasing demand, and will also
contribute to the trend of bifurcation in oﬃce
performance based on location and age, as
many tenants clearly favour modern oﬃces
with good accessibility and amenities, andmodern ESG speciﬁcations.
The inﬂux of a large amount of new
supply in 2025 may exacerbate this issueeven further, and some older oﬃces with
undesirable features will likely continue tostruggle, and observers may anticipate an
uptick in secondary vacancies going forward.
Nevertheless, the market looks to continue
improving overall, albeit gradually. It remains
to be seen how broader economic trends willaﬀect corporate behaviour in the coming
year, yet the encouraging performance of theJapanese economy in 2023 is a positive signfor leasing demand moving forward.